3 Points to Consider When Deciding Between Individual or Joint Life Insurance Policies

Posted by
Steven Keogh

Apr
8

There are many situations when a joint life insurance policy can be cheaper than paying out for two separate policies, making it seem the most attractive option.

However, before taking out a joint life insurance policy consider the following points and ensure that you make the decision that is going to be right for you.

1. Who Should Be Protected

Though joint life cover is held in the names of both individuals, it is only valid on a ‘first death’ basis. This means that as soon as one policyholder has died, the insurance provider will issue a payment and the cover will immediately expire. This leaves the second policyholder with no protection at all, even though they have been paying premiums for years.

Such a policy could be ideal for those with a mortgage that simply want to pay off their debt and have no further funds available to them. However, if such a policy has been taken out to provide protection to children or other dependents, then the benefit of joint life cover can be severely lacking.

Furthermore, if a remaining policyholder then decides to take out a single life insurance policy, they will find that their increase in age and possible deterioration in health may mean future premiums could be significantly higher. Therefore the benefit of paying joint cover for years has amounted to nothing. Only by having separate policies is it possible for every individual to have the personal cover they require.

Please note that here at Insuranet we can arrange a ‘second death life insurance policy’ which would pay out on the death of the last remaining partner. If you are at all unsure which type of policy is best for you then please feel free to speak with one of our friendly adviser who can talk you through all of the options.

2. The Level of Cover Required

An individual life insurance policy is based on the cost of replacing your contribution to the home, should you no longer be able to provide it yourself.

However, for joint life insurance policies, the level of cover provided is equal for both parties and is usually calculated on the amount required to replace the income of the higher wage earner.

This means that the partner that requires a lower value of life insurance will pay premiums for a level of cover that is simply not needed. In addition, if the main breadwinner adds extras such as critical illness to his policy, both parties will be charged for the same additions, creating further unnecessary expense across the policy as a whole.

Always assess the level of cover required for each individual policy and ensure no on is paying for more or less cover than they need.

3. The Level of Risk

The cost of life insurance premiums is calculated in direct proportion to the risk associated with protecting the life of the applicant. However, in the case of a joint life insurance party, the level of risk is calculated jointly rather than in terms of each individual person.

Should one partner have a lifestyle that is deemed risky or, have a medical history that puts them in a higher risk category, both applicants will be priced according to this maximum level.

When it is clear that the risk associated with one life insurance applicant is significantly higher than the other, separate life insurance policies may turn out to be considerably cheaper and provide better all-round protection.

Author Bio: This article was written by Steven Keogh who has worked in marketing within the financial sector for many years now. For further details please visit his Google+ page.